QUESTION marks hang yesterday over the chances of a deal for a second batch of austerity measures by the end of the week, as trade unions again threatened strikes and with the country still facing the threat of another credit downgrading.
Unions representing workers in the civil service and the broader public sector reject government proposals for a 25 per cent cut in 13th salaries and a two-year freeze on payment of cost of living allowance (CoLA).
Finance Minister Kikis Kazamias met successively with the leaderships of OEV (Employers and Industrialists Federation) and KEVE (Chamber of Commerce and Industry), and the trade unions PEO, SEK and PASYDY. A new meeting with the unions has been set for today.
What with unions threatening strike action in response to “unilateral action” by either the government or legislators, Kazamias appears to have little wiggle room before tabling the second austerity package to parliament this week.
The bulk of the contemplated measures for 2012 include a proposed 2.0 percentage point increase in VAT to 17 per cent and an estimated €200 million of savings through revised targeting of social expenditure.
Last week ratings agency Standard and Poor’s retained Cyprus on credit watch pending approval of the second package.
Cyprus aims to keep the public deificit to below 2.0 per cent for 2012, and to nil by 2013, requiring major government cutbacks, primarily from the state payroll.
Glafcos Hadjipetrou, head of the blanket civil servants union PASYDY, reiterated that they’d accept no docking of CoLA or of the 13th salary.
PASYDY was open to ideas on redistributing CoLA in a way that would make the system fairer, said Hadjipetrou, but added:
“Under no circumstances shall we agree to the pie shrinking. We have no objection to a redistribution of CoLA, so long as the [total] amounts are the same.”
In addition to possible strike action, Hadjipetrou revealed that the union is considering suing the state over recent changes to civil servants’ pension schemes.
The pension schemes are affected by the increase in social insurance contributions from civil servants, in a law passed last month by parliament.
Any unilateral changes to civil servants’ pensions are illegal, Hadjipetrou said, noting that PASYDY would take legal action once the measures are actually implemented.
Meanwhile the president has sent back to parliament a law suspending payment of five per cent VAT on a homeowner’s. The law, passed late last month as part of the first batch of austerity measures, was intended by legislators to give a boost to the lagging housing market and the economy at large.
Justifying his decision, the president informed parliament that the law “does not fall within the context of welfare policies, and moreover in times of economic crisis, the granting of a lower tax rate for residences of up to 388 square metres, should be considered a luxury.”
The president said also that implementing the law would actually see state expenditure rise by €80 million per year via an increase in tax refunds.
The House Finance Committee is also looking at a government bill slashing some 200 currently vacant full-time positions in the civil service. The committee was informed yesterday that the 2012 budget, which is to be submitted to parliament shortly, will provide for doing away with around 1,000 positions in the civil service.
And a separate government bill will see €10 million transferred from the Finance Ministry’s budget to the Welfare Services (Ministry of Labour). The cash is to be made available to single-parent families and the long-term unemployed, to offset the extra financial burden arising from the increase on VAT and foodstuffs introduced at the beginning of this year.
While welcoming the government initiative, House Finance Committee chairman Nicolas Papadopoulos said the bill was telling of the “utter confusion under which the government operates”.
Had the government not introduced the VAT increases in the first place, there now would be no need for offset measures, he said.
Papadopoulos went on to wonder how the Ministry of Labour was unable to make cutbacks from other programmes to raise €10 million when its budget exceeds €1 billion.
